THE PROPERTY DEVELOPMENT REVIEW
landscape is evolving, and strategic decisions are crucial for sustainable growth. How do you foresee regional property across the various asset classes faring as we enter a period of interest rate stabilisation and possible declines? While interest rate stabilization and potential declines pose challenges, regional property in South Australia shows resilience across asset classes. Strategic decisions and monitoring market dynamics will be crucial for investors and developers. The outlook for interest rate stability is a crucial factor, moderating inflation may prompt central banks to pivot toward interest rate cuts in 2024. If interest rates begin to fall, growth sectors including industrial real estate are likely to benefit. Industrial property - Industrial assets have demonstrated resilience in recent times, rents continue to rise, albeit at a slower pace, driven by sustained demand drivers. A growing preference for industrial real estate appears to be influenced by both structural and cyclical factors. Long- Term Prospects - Government initiatives targeting growth in food, hi-tech, space, and defense industries look to sustain industrial activity. Retail Property - As interest rates stabilize or decline, consumer spending patterns may shift, impacting retail property demand. Residential Property - The South Australian residential market, like the broader national commercial property market, is in a phase of “wait and see”. What does the development pipeline look like in your specific markets and what are some of the bigger projects slated for commencement in 2024? A record call-out for builders is underway to deliver the first real increase of public housing in a generation. South Australia’s development pipeline includes a mix of affordable housing, industrial infrastructure, and public housing projects. These endeavours contribute to economic growth and address critical housing needs. The list below highlights only a handful of residential developments slated in South Australia’s property market: - CONTINUED OVER PAGE -
How has feasibility for residential development sites been impacted by interest rate instability and building costs in regional areas? And have you seen developers moving away from residential into other sectors like industrial or mixed-use development? Interest rates have played a significant role in determining the feasibility of residential developments. When rates rise, borrowing costs increase, affecting developers’ ability to finance projects. Higher mortgage costs may deter potential home purchasers, affecting demand for new residential properties. Building materials have become more expensive and may continue to increase combined with labor shortages are contributing to delays and increased costs. In some instances, previously sold houses (off the plan) are being canceled due to cost escalation of these and other factors since the initial contract was signed. Developer Trends - Residential versus Other Sectors Residential: • Mixed-use developments, developers are exploring new typologies that integrate residential and light industrial spaces. This approach combines housing with low-impact industrial activities. • Economic viability, developers are considering mixed-use projects due to profitability. Rezoning land to mixed-use can lead to higher land values, encouraging redevelopment. • Population pressure, growing cities need more homes and workspaces. Integrating residential and light industrial areas can provide solutions for sustainable growth. Other Sectors: Some developers are diversifying into industrial projects. Industrial spaces are essential for manufacturing, logistics, and renewable energy sectors. Mixed-use, developers are exploring creative ways to combine residential, commercial, and light industrial components within neighborhoods. This approach supports local growth and job creation. In summary, interest rate fluctuations and building costs have impacted the feasibility of residential development in South Australia. Developers are adapting by exploring mixed- use options and diversifying into industrial projects. The
April / May 2024 – 89
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